Investors are facing challenging markets as new threats are emerging in the form of social media, retail investor blogs and short campaigns, warns Nasdaq.
The latest Nasdaq Shareholder Activism: 2022 Year-in-review looks at the most pressing data and trends regarding activist investor movement.
The report finds that social media and blog posts are becoming a frequent and effective tool for lower-tier activism, with 10 percent of US campaigns in 2022 reported on the financial website Seeking Alpha.
In the US, while less than 10 percent of activist campaigns changed boards in 2022, Nasdaq says companies should investigate why the ‘sheer quantity’ of campaigns emerged in 2022.
Growth, inflation headwinds
Looking at the macro environment, many companies are facing headwinds due to economic growth, inflation and industry or company-specific dynamics, according to the findings.
Short attacks, short research and actively disclosed short positions are all strategies aimed at moving a stock price lower and benefiting from the underperformance, the report finds.
A steady increase in the short attacks trend has been seen over the past five years. In the US, for example, nearly one in four campaigns are short, although the report acknowledges that while none of these resulted in board changes in 2022, many did help move stock prices.
Looking forward, Nasdaq highlights top trends to watch out for in 2023, including governance changes, unlocking value, proxy voting, board changes, short campaigns and acquisition bids.
Jared Wasserman, associate vice president in Nasdaq's IR Intelligence business, says: ‘Increasing inquiries from our IR, ESG and governance clients brought together a range of Nasdaq perspectives and experiences to help guide issuers in a market environment historically favorable to activism.
‘We plan to closely monitor the impact of the SEC’s recent universal proxy rule launch along with the emergence of new activists and emerging activist strategies and continue to share our findings and guidance throughout 2023.’
Andrew Pringle, director in Nasdaq’s IR Intelligence business, adds: ‘The 2023 proxy season will be the first with the new universal proxy rules in place, and we suspect activism will remain a key focus area for issuers as result.
‘We are also seeing more activists working against companies with high-profile short attacks and campaigns that specifically aim to remove board members and/or executives. As a result, we urge companies and their boards to stay diligent and keep a pulse on both their stakeholders and broader market sentiment.’